2022 (7) TMI 1359 - AT - Insolvency and Bankruptcy

Adjudicating Authority Upholds CoC Decision on Distribution Plan, Rejects Minority Appellant Objection

Union Bank of India (earlier known as Corporation Bank) Through Sh. Pritpal Singh Vilkhu, Chief Manager Versus Mr. Rajender Kumar Jain, Resolution Professional of M/s Kudos Chemie Ltd. & Ors.

The Adjudicating Authority upheld the CoC's decision on distribution of amounts under a Resolution Plan, rejecting the minority Appellant's objection. The ... CIRP - distribute of money under the Resolution Plan - Resolution Professional has given four options for distribution of amounts to the Financial Creditors - Appellant has chosen option-3 - CoC by majority has decided for distribution as per Option-1 - HELD THAT:- The decision of the CoC regarding the distribution of amount is in its commercial wisdom which we cannot question or be questioned by the Appellant. - The Adjudicating Authority has rightly referred the judgment of the Hon’ble Supreme Court in “India Resurgence Arc. Pvt. Ltd. Vs. M/s. Amit Metaliks Ltd. & Anr.[2021 (6) TMI 684 - SUPREME COURT]” The above judgment of the Hon’ble Supreme Court is fully attracted in the facts of the present case and we do not find any error in the order of the Adjudicating Authority rejecting the Application relying on the above judgment of the Hon’ble Supreme Court. There is no merit in the Appeal. Issues:1. Distribution of amount to Financial Creditor under Resolution Plan.2. Appellant's objection to distribution as per CoC decision.3. Adjudicating Authority's rejection of Appellant's Application.4. Commercial wisdom of CoC in distribution decisions.5. Applicability of Hon'ble Supreme Court judgment on creditor's dissent.Analysis:1. The appeal was filed against the Adjudicating Authority's order rejecting the Financial Creditor's application seeking specific directions for the distribution of an amount under the Resolution Plan. The Appellant, a minority CoC member, opted for a particular distribution option, which was outvoted by the CoC in favor of a different option.2. The Appellant contended that the distribution should be done as per their chosen option, but the CoC, with a majority vote, decided otherwise. The Adjudicating Authority upheld the CoC's decision, emphasizing that the distribution was based on total dues of voting share and was not arbitrary. The Authority found the Appellant's contentions untenable and approved the resolution plan as per the majority vote.3. The Adjudicating Authority referenced a Supreme Court judgment emphasizing that the distribution of amounts to different classes of creditors is within the commercial wisdom of the CoC. The dissenting creditor cannot demand a higher amount based on the value of security interest. The Authority concluded that the CoC's decision was valid commercial wisdom, aligning with the Supreme Court's ruling.4. The judgment highlighted that the CoC's decision on distribution is a matter of commercial wisdom that cannot be challenged by individual creditors. The Adjudicating Authority's decision to dismiss the Appellant's application was based on the commercial rationale behind the CoC's distribution choice, as supported by the Supreme Court's precedent.5. The Hon'ble Supreme Court's ruling in a similar case was cited to underscore that the CoC's discretion in determining payment amounts to creditors is protected under the law. The judgment concluded that the Adjudicating Authority's decision to reject the Appellant's application was justified, as it aligned with established legal principles and the commercial autonomy of the CoC. Consequently, the appeal was dismissed.